B-125032: Published: Nov 23, 1964. Publicly Released: Nov 23, 1964.

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The General Accounting Office has made a review of the administration by the Department of the Interior and the Federal Power Commission (FPC) of that portion of section 5 of the Flood Control Act of 1944 (16 U.S.C. 825a) which provides that the rates at which the Department of the Interior markets hydroelectric power and energy generated at projects constructed and operated by the Department of the Army become effective upon confirmation and approval by the FPC. Our review was made at the offices of the Department of the Interior in Washington, D.C., and at the Southwestern Power Administration in Tulsa, Oklahoma. We reviewed the applicable legislation, related policies and procedures of the agencies involved, selected contracts, and related background data, concerning the marketing of hydroelectric power by the Department of the Interior. This review was made pursuant to the Budget and Accounting Act, 1921 (31 U.S.C. 53), and the Accounting and Auditing Act of 1950 (31 U.S.C. 67).

The Department of the Interior has been selling hydroelectric power and energy, generated by three projects under the control of the Department of the Army, to the Tennessee Valley Authority at rates which have been specifically disapproved by the Federal Power Commission. About $12.6 million in additional revenues would have been collected from the Tennessee Valley Authority over the past 15 years if rates conforming to the criteria contemplated by the Federal Power Commission had been in effect. In addition, the Department agreed to an amendment revising the rates in a power-marketing contract with the Arkansas Power & Light Company but did not submit the revised rates to the Federal Power Commission for approval. During calendar year 1961, the period in which the amendment was in effect, the Government received $822,000 less from the Arkansas Power & Light Company than would have been received for the same amount of hydroelectric energy if the contract had not been amended. Section 5 of the Flood Control Act of 1944 (16 U.S.C. 825a) provides that rate schedules for the marketing of hydroelectric power and energy by the Secretary of the Interior from projects under the control of the Department of the Army become effective upon confirmation and approval by the Federal Power Commission. However, the act does not state what action can or should be taken when power and energy are marketed at rates that have been disapproved by the Federal Power Commission or at rates which have not been submitted for confirmation and approval. Since December 1948 the Department of the Interior has been selling hydroelectric power and energy generated at and not needed in the operation of three projects under the control of the Department of the Army to the Tennessee Valley Authority although the rate schedules for the power and energy were specifically disapproved by the Federal Power Commission in May 1958. In another situation, the Department of the Interior, in January 1961, agreed to an amendment to a power-marketing contract with the Arkansas Power & Light Company under which the Government received $822,000 less in revenues during 1961 than would have been received for the same amount of hydroelectric energy under the contract provisions in effect prior to the amendment. The Department of the Interior did not consider the amendment to constitute a rate change and therefore did not submit the amendment to the Federal Power Commission for confirmation and approval. When we brought this matter to the attention of the Federal Power Commission, the Chairman informed us that, in the Commission's opinion, the amendment did constitute a rate change which required the Commission's approval. However, the Chairman stated that our advice of the matter was the Commission's first notice of the amendment and that the Flood Control Act of 1944 does not provide the Commission with retroactive authority. We believe that these circumstances indicate that, if the Federal Power Commission is to effectively confirm and approve rate schedules for the marketing of hydroelectric power by the Secretary of the Interior from projects under the control of the Department of the Army, setion-5-iI of the Flood Control Act of 1944 will have to be amended. The Assistant Secretary for Administration, Department of the Interior, has advised us that the Department does not believe that the circumstances which we have cited warrant such an amendment at this time. The Chairman of the Federal Power Commission has advised us that the Commission also does not believe that an amendment is needed. He has stated that the Commission believes that, where an operating agency fails to comply with the statutory scheme, the appropriate enforcement role which the Commission should play is to report the violation to the President of the United States and the Congress.